Two little economic lessons for Dawn Foster

Ms. Foster needs to have a little bit of remedial economics:

Social housing pays for itself

No, it doesn't, quite clearly and quite obviously. It charges less than market rent therefore it must make a loss. To ignore this is to miss one of the two things about economics that even a Guardian writer should manage to get, incentives matter and there are always opportunity costs.

It is the second which is in play here. If social housing were let at full market rent then some amount of money would be rolling in. As it is let at less than market rent less is - the amount not rolling is the loss from the activity.

Note that this is nothing at all to do with whether housing for the poor should be subsidised by the rest of us or not, nor whether social housing is the correct way to do this. We have argued here that all rentals should be market rent and housing benefit used to pay for those who cannot afford it. Precisely upon the grounds that this makes visible the opportunity costs. And when that bill is seen to be the size it is then perhaps we'll all go off and actually solve the problem by blowing up the Town and Country Planning Acts.

But that there are opportunity costs from below market rents is indisputable, it's simply fact. Social housing does not therefore pay for itself.


The problem is not tower blocks, but safety and how willing companies are to risk lives to save money: most buildings won’t have similar fires, but any with similar renovations could.

This is not a feature of companies, this is a feature of our universe. Human desires and wants are unlimited, resources to meet them are scarce. Everything, but everything, is therefore a trade off. We can make cars rather safer by making them tanks that move at 3 mph. That would perhaps not be a good trade off. We could undoubtedly make tower blocks safer at some cost. But that's not the question which needs to be answered. The one that does is how much safer at what cost?

For example, perhaps fire accelerating cladding at the cost of saving on the heating bills isn't all that good an idea? 

This is, of course, just opportunity costs all over again. The price of greater safety is whatever we cannot do as we've used our resources on greater safety.

Please do note that even we don't think that the balance is correct here at present. But we do absolutely insist that we've got to ask the right question before we can have any hope of gaining the right answer. What are we prepared to give up to make those tower blocks how much safer?